7 out of 10 Index Components of Small Business Optimism in U.S Show Growth

NFIB Index of Small Business Optimism, in May, increased to 92.2(gaining 1.6 points). Out of 10 Index components, 7 increased, with job creation and plans for capital expenditure remained at the same levels.

Trends in some of the major components are as follows:

Inventories and sales
The net percent of all owners (seasonally adjusted) having higher nominal sales improved four points to a net negative 11 percent in the past 3 months, and up by 14 points in the past two months. It is found to be best since April 2008.

Credit Markets
32 percent(1 point above survey record low) of them who are accessing capital markets at least once a quarter, continued to report difficulties in obtaining credit. Overall, 92 percent of the owners reported that all their credit needs were met, or they did not want to borrow.

Only 3% percent of the owners cited “finance” as their top business problem, while 30 percent cite weak sales.

Profits and Wages
Of the companies reporting low turnover or losses, 53 percent said weaker sales, 4% cited rising labor costs, 6 percent increase in materials costs, 4% percent increased insurance costs, and 6% cited lower selling prices and another 6 percent cited taxes and regulatory costs. Regarding wages, 10% said they have reduced compensation and 13% reported gains.

Labor markets:
Over the next three months,7% plan to reduce employment and 14 percent plan for new jobs . These two remain unchanged from the last results.

Spending on Capital:
The frequency of capital outlays were unchanged at 46 percent of all firms, over the last 6 months. 20% (4 points above 35 year record low) of owners are planning to make capital expenditures over the next few months. 5% (up by 1 point) say the current period is a good time to expand facilities. However, small business owners were far less optimistic than previous years about the economic recovery.

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